Australia’s economic outlook for 2024: Dodging recession, but inflation remains a concern
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Australia is expected to avoid a technical recession in 2024, largely due to brisk population growth, according to Oxford Economics Australia’s bi-annual economic outlook conference.
However, the issue of inflation is set to persist, with impacts across all sectors of the Australian economy, mirroring global trends.
Oxford Economics CEO Adrian Cooper said that while headline inflation has fallen markedly globally, getting core inflation back to two per cent will be a challenge.
“It might happen first in the Eurozone given the weakness of the economy. But it’s not expected to happen in the US or UK in 2024,” Cooper said.
In Australia, both fiscal and monetary policy are at or close to the peak drag they will impose on the economy in this cycle, according to Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia.
“We expect strong population growth will ensure that Australia stays out of recession,” Langcake said. “But policymakers will need to walk a fine line to ensure cost of living pressures do not overwhelm vulnerable households, inflation returns to target in a timely fashion, and the labour market remains close to capacity.”
Oxford Economics does not expect to see rate cuts in Australia until the fourth quarter of 2024, with cost pressures on the services side of the economy remaining elevated and rent inflation set to continue at a brisk pace.
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On the climate front, Australia’s emissions are dropping, but not fast enough to meet the 2030 targets, according to Kristian Kolding, Head of Consulting for Oxford Economics Australia.
“Our most likely forecast scenario suggests we’ll miss our 2030 targets by a couple of years as the roll out of renewable energy is taking longer than expected,” Kolding said.
In the real estate sector, residential property in all major markets brushed off higher borrowing costs over 2023, but more varied performance is anticipated for both price and rental metrics in 2024.
The construction sector is facing a challenging period, with total construction work done expected to fall in real terms through the year for the first time since 2020.
“While some sectors are feeling more pain than others, in aggregate the sector is a long way from a ‘hard landing’,” said Adrian Hart, Head of Construction and Infrastructure Consulting for Oxford Economics Australia.